In a bid to cut cost of paper production, Indian paper mills imported 133 per cent more waste paper during the first half of the current financial year following a sharp increase in pulp prices.

Data compiled by the Union Ministry of Commerce showed India’s waste paper import at 3.5 million tonnes for the period between April and September 2018 compared to 1.5 million tonnes in the corresponding period last year. During the financial year 2017-18, India’s import of waste paper stood at 4 million tonnes as against 3.2 million tonnes in the previous year.

Used as a substitute of pulp as raw material for paper manufacturing, mills tweak their requirement of waste paper depending upon the comparative price movements in both inputs. Tweaking strategies for raw material procurement not only helps mills control paper production but also plan efficient business strategy for sale at competitive price.

“Imports of recovered (waste) paper had reached 3.1 million tonnes in FY15 from 2.1 million tonnes in FY10, increasing at a CAGR of 8.1 per cent. Thereafter, the imports remained steady at 3.1-3.3 million tonnes level for three years through FY17. However due to Chinese regulatory modifications in 2017 resulted in a 25 per cent annual increase in imports to 4 million tonnes in FY18,” said Madan Sabnavis, Chief Economist, Care Ratings.

The geographical location of the mill often determines the type of raw material used for paper manufacturing. Most mills in the northern and western regions of India utilise agricultural residues and recovered paper, while southern and eastern regions uses wood and bamboo as raw materials. More than 50 per cent of the total paper produced from recovered paper is produced in western India due to availability of berthing space at ports to import raw materials.

“Recovered paper is mainly utilised for manufacture of newsprint, duplex and kraft paper. Processing of waste paper to obtain clean stock for paper making involves a number of cleaning stages to remove contaminants present in the waste paper,” said a senior industry official.

Meanwhile, waste paper prices have declined by a staggering 16 per cent to an average Rs 13.7 a kg in the first half of the current financial year from Rs 16.3 a kg in the same period previous year. By contrast, however, the benchmark international pulp prices jumped to Canadian $1150 a tonne for the period between April – September 2018 versus Canadian $950 a tonne in the previous year.

“However, imports are expected to continue to grow given high availability of international waste paper at low rates and low recovery rate (~30 per cent) of wastepaper domestically due to lack of well-structured collection channel of wastepaper in India. However, such imports should not be allowed to contain hazardous or high levels of contaminants which could cause environmental damage. The imports can only be reduced when the domestic recovery rate increases i.e. not only recycling but also collection on a sustainable basis,” said a Care Ratings study.

Mills using waste paper as raw material are set to improve their profit margins in the quarters to come due to forecast of subdue price this cheap raw material.